2009年9月29日星期二

Hong Kong Police Raid Ernst & Young Office in Akai Audit Probe

"Hong Kong Police Raid Ernst & Young Office in Akai Audit Probe | AboutHK.Com - More Information About HK"

Bloomberg

Hong Kong Police Raid Ernst & Young Office in Akai Audit Probe Ernst & Young Hong Kong, which last week settled a negligence lawsuit over its auditing of bankrupt Akai Holdings Ltd., was raided by police yesterday as part of an investigation.

“The Commercial Crime Bureau today conducted an investigation into a case of suspected ‘forgery’ involving an auditing firm in Hong Kong,” police spokesman T.K. Ng said in a statement yesterday. The police arrested a 41-year-old male at his residence, Ng said, declining to identify the firm or man.

“It is our intention to engage with and support further investigations into the Akai matter,” Ernst & Young said in an e-mailed statement yesterday. “Consistent with that approach, when our offices in Hong Kong were visited today by the Hong Kong police, we lent them every assistance.”

The Hong Kong affiliate of Ernst & Young LLP on Sept. 23 suspended one of its partners, Edmund Dang, after an internal investigation into its role at Akai, which went bankrupt in 2000 owing creditors about $1.11 billion, the Chinese city’s biggest corporate collapse. The firm agreed to pay an undisclosed “substantial” amount to Akai’s liquidator, Borrelli Walsh Ltd., to settle claims of negligence in its audit of the consumer electronics company between 1997 and 1999.

The Hong Kong Institute of Certified Public Accountants will monitor police investigations into Ernst & Young, Winnie Cheung, chief executive of the accounting regulator, said by phone yesterday. The institute, which doesn’t have its own investigative powers, may fine or ban any offenders if the police probe reveals any wrongdoing, she said.

Borrelli Walsh Suit


“If it is proved that documents were indeed tampered with or altered so as to no longer be an accurate record, there are several serious criminal offences that the police might be considering, including forgery and false accounting,” said Nigel Francis, head of Minter Ellison’s disputes practices in Hong Kong, who doesn’t represent either party in this case.

Borrelli Walsh had sought “hundreds of millions of dollars” in its suit from Ernst & Young. It alleged at the trial’s opening on Sept. 16 that files dating from 1994 were altered later to give a semblance of an audit trail.

“We are dismayed by the unexpected circumstances that have arisen,” David Sun, Ernst & Young co-area managing partner of the Far East, said in a statement last week.

“While we do everything we can to live our values, no global organization of more than 135,000 people can be totally insulated from the risk of one or more individuals not upholding these values,” he said.

Increased Scrutiny


Ernst & Young, one of the so-called Big Four accounting firms, and auditors have come under increased scrutiny since the 2001 collapse of Enron Corp., which brought down Arthur Andersen LLP. Ernst & Young Hong Kong is also being sued by the liquidators of Moulin Global Eyecare Holdings Ltd. for “wasted and unnecessary work” done between 2007 and 2008, according to court documents.

Akai at its peak employed 100,000 workers and had annual sales of HK$40 billion ($5.2 billion) with brands including Singer Sewing Machine Co. of the U.S. Its Shanghai-born, Canadian-educated owner James Ting was jailed for six years for false accounting in 2005 and freed the following year because of errors in the prosecution’s case.

Ting was accused by Borrelli Walsh’s lawyer Leslie Kosmin of being a “fraudster within Akai who brought down the company and whose clear and obvious fraud” Ernst & Young failed to detect, according to court documents.

Falsifying Documents


Borrelli Walsh has also accused Grande Holdings Ltd. Chairman Christopher Ho, a former Ernst & Young partner, of stripping Akai’s assets and falsifying certain documents. Hong Kong’s Court of Appeal on Sept. 24 upheld an earlier judgment ordering Ho not to dispose assets of as much as $200 million. Grande said yesterday the Hong Kong courts have also placed restrictions on certain asset sales.

Ho couldn’t immediately be reached for comment and calls to Grande’s senior general manager Sylvia Lai weren’t answered. Ernst & Young declined to comment on Ho.

Moulin was once the world’s third-largest eyewear maker before defaulting on its loans. It went bankrupt in June 2005 after owing almost $500 million and disclosing accounting errors.

To contact the reporters on this story: Andrea Tan in Singapore at atan17@bloomberg.net This e-mail address is being protected from spambots. You need JavaScript enabled to view it ; Mark Lee Wai Yee in Hong Kong at wlee37@bloomberg.net This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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